tv Wall Street Journal Rpt. NBC July 24, 2011 4:00pm-4:30pm PDT
>> hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. once again reporting from outside the new york stock exchange. the clock ticks on america's debt. will washington get a deal done? and what happens if they don't? buying into private companies before they go public. who does it and how? the young entrepreneur behind secondmarket. and luxury travel for less. if you're looking for last-minute deals, we have some cool getaways to escape the steamy weather. "the wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report." now maria bartiromo. >> here is a look at what is making news as we head into a
new week on wall street. america's debt ceiling deadline is rapidly approaching, and we are still waiting for word of a deal. talks are ongoing, meetings continue between the white house and congressional leaders, and there has been renewed optimism about a big deal happening to reduce the deficit and raise the debt ceiling. but so far nothing concrete. it was a busy week for the markets stopped short on tuesday. the dow up better than 200 points on hopes of a debt and deficit deal, the biggest one-day gain since december. the markets had another triple-digit gain on thursday. but the markets were down on friday. we're in the thick of earnings season, and most companies are coming in ahead of expectations. apple had a blowout quarter. intel beat expectations. so did microsoft and yahoo. but yahoo's outlook was weak. among financials, morgan stanley and wells fargo beat expectations. bank of america met estimates, while goldman sachs did not. and a big bang in housing starts for the month of june. they rose better than 14% from the month earlier, ahead of expectations. much of the surge coming from
construction of apartment building. american airlines has two aircraft makers flying high. american's planning to place the largest aircraft order in aviation history. it will buy 460 planes from boeing and airbus beginning in 2013. will america default on its debt, or will washington figure out a way out of this potential economic disaster? what does it all mean for your portfolio? joining me now is jason trennert, the chief investment strategist at strategas research. always nice to have you on the program. >> thanks for having me. >> it appears that recent progress on both sides in congress in terms of raising the debt ceiling and cutting the deficit. how are you feeling about this as it relates to our money? >> our guy is washington probably puts the odds of either some sort of technical default or downgrade low single digits. i think that's the good news. i think that's mainly because number one, u.s. is still the reserve currency in the world. and two, it's very, very hard to know who politically would benefit from a standoff at this
stage. no one really quite knows what the economic ramifications except to know they would be very bad. and no one knows where the political blame would be placed. our own particular view is even though it might look worse before it gets better in this week coming up, that ultimately a deal will be reached by august 2nd. there are even some positive things that might come out of it as a result of these negotiations. one of the things the republicans might get in combination with some other concessions they have to make on their side. >> that certainly would be a positive for business. >> huge. >> i mean it's amazing to me that we have gotten this far, actually, and it's so close to august 2nd. if we don't see a deal by august 2nd, what are the implications? >> listen, the first thing i would say if we don't get a deal, the so-called default position would probably be a government shutdown rather than a technical default on the debt, which is much better from the standpoint of just u.s.'s credit
rating and its overall impact on the economy. minnesota just had a shutdown. the things people were most upset about is they couldn't get fishing licenses or couldn't buy beer and cigarettes. it wasn't that big of a deal. still, though, if we get to the point where we're actually missing payments, that would have a deleterious effect on the economy mainly because the government is about 20 to 25% of the overall gdp of the economy. >> let's talk about terms of what is going on in business right now. corporate earnings have been better than expected. how you navigating the earnings season and what does that mean for the stock market? >> the earnings couldn't have -- it can't be much better. you're looking, if you have seen google or apple or morgan stanley, it hasn't been uniform, but generally speaking the numbers have been fantastic. what is remarkable to us is this is the first time in period where we have seen corporate profits be so divorced from the employment picture. companies are making more and more money, yet they're not hiring more workers. and generally speaking, there is a very, very strong correlation
between those two things. i think part of it is what has been said by steve wynn and larry sink this week. that i do think companies are somewhat afraid. they have seen this hyperactivity in terms of the regulatory environment in washington. and they're afraid. they can make money by cost-cutting and finding other markets. but until they have greater clarity on what the actual rules of the game will be, i think it's unlikely that you're going to see big movements to actually increase business or increase hiring. >> it's a great point. this is an area where we really need government and business to come together, where we would see the right policies in place that would encourage business, actually create heads and jobs. >> the capital is there. the money is there. i would say corporate balance sheets in aggregate probably haven't been much better in the history of american business. banks are still somewhat under pressure. but you don't even necessarily need the banking system as much as you did in the past because most corporations have a ton of cash on the balance sheet and the balance sheets are very
strong. >> let's talk about europe. how do you want to invest today, knowing what is going on in europe. look at the global economy for us. where is the best place to allocate money today? >> i have to say large u.s. multinational corporations are probably the best deal on the planet right now. i think mainly because we're still a reserve currency. i think we're going to get a deal, as we mentioned before. europe in my view, they have some short-term fixes this week that will help the situation from a liquidity point of view. but you're still dealing with massive solvency issues in the euro. and my own particular feeling is i would be short the euro versus the dollar, and i also am very much of the belief that you're probably going to cgo from prics to price. if you look at the united states, some of the world-leading companies we have here who are increasing dividends, buying back shares, engaging in m & a at very low multiples. you have a situation where apple is trading at 13 times earns, and the alternative is buying a u.s. treasury that is yielding
you 3% for ten years. u.s. equities in my view represent a tremendous value for the average investor. >> in terms of policy, this week was the first anniversary of dodd-frank. so what has been the impact of dodd-frank? some of these rules are still being written, which of course is the issue. >> well, maria, you're exactly right. i saw an estimate this week that said something like 95% of the rules that will need to be written for dodd-frank have yet to be written because you need to have 100 impact studies before you actually write the rules. at least thus far, the impact of dodd-frank hasn't been all that great. the problem, though, is it goes back to what we're seeing before. if you don't know what the rules of the game are, i run a small business. when you're constantly looking over your shoulder in terms of the regulatory impact, taxes, it leaves you less time and less money to hire people. and i think that's part of the issue that we're seeing. i think if you had greater clarity on what those rules would be, it would help out a lot. >> so you said you liked multinationals, the large
companies in the u.s. that are actually benefitting from the rest of the world's growth. what other sectors do you like? >> i would say within that it's tech and health care. we have a high beta technology and lower beta health care. the good news is that a lot of the regulatory storm for health care has passed. you saw a big m & a deal this past week in the health care states. and i also think when you look at the technology earnings, that they really can't be much better. and they're doing all sorts of things to increase shareholder value in the tech phase, whether it's increase dividends or share buybacks or m & a. those are the two segments we're most focused on right now. >> we'll leave there it. jason, always nice to have you on the program. >> thanks for having me. >> we so appreciate it. jason trennert joining us from strategas. up next, making millions from facebook, twitter and other social media success. buying into private companies before they actually go public. the money to be made in secondmarket. and later ecommerce offers
luxury vacations at a discount. jetsetter.com ceo will join us to tell us where he is off to next. as we head to break, a look at how we ended the week. the stronger the rapids, the more we loved it. took some wild risks when i was young. but i was still taking a risk with my cholesterol. anyone with high cholesterol may be at increased risk of heart attack. diet and exercise weren't enough for me. i stopped kidding myself. i've been eating healthier, exercising more, and now i'm also taking lipitor. if you've been kidding yourself about high cholesterol, stop. along with diet, lipitor has been shown to lower bad cholesterol 39 to 60 percent. lipitor is fda approved to reduce the risk of heart attack and stroke in patients who have heart disease or risk factors for heart disease. [ female announcer ] lipitor is not for everyone, including people with liver problems and women who are nursing, pregnant or may become pregnant. you need simple blood tests to check for liver problems. tell your doctor if you are taking other medications or if you have any muscle pain or weakness.
welcome back from wall street, where a new generation of entrepreneurs is making money trading shares of companies not yet listed on public exchanges. with bold-faced names like facebook, with its 500 million users, receiving valuation estimates of some $75 million, private venture-backed social medias are cropping up on an exchange called secondmarket. joining me is barry silbert, the founder of secondmarket. great to have you on the program. thank you so much for joining us. the secondmarket trades alternative investments. tell us how it works and who is trading. >> what we have done is we have a marketplace to allow buyers and sellers to come together.
essentially any investment that is about to trade on exchange. the private companies that are now trading on secondmarket, we're giving them a venue where they can stay private much longer and allow a group of investors to get involved before the deal. >> it's been an enormous success. the area of the exchange trading in private companies. 400 million last year, on pace to top a billion dollars. >> we are about 800 million right now. it's growing really, really fast. i think what is happening is people are realizing the only way to get involved for an ipo is to come to a second market. >> a large percentage of that in a little company called facebook which of course we all know and use. tell me how you link the buyers and sellers in private companies like facebook. >> we kind of look at the public markets as an old system where it's subject to the casino-like trades. what we try to do is slow the things down where a company gets to control how the market operates. the company decides when the markets open. it is once a year, twice a year, once a week?
they decide who the buyers are and the sellers are and we run auctions. >> what is the environment like for this kind of investment? and how might you expect that to change? >> the regulators i think have recognized that this secondary market is here to stay. it's now taken companies upwards of ten years to go public, it takes half that time. to the s.e.c. is looking at a number of rules that will make this market i think more robust and add more volume and more capital to this market by loosening up some rules like there is a limit on how many shareholders you can have or having to go public, things like that. >> so what is the downside for investors. you don't have the transparency standards. that's one thing that investors need to be aware of. is there a deficit of information? >> i think it's important to realize that we don't -- when companies are trading on second markets, we're giving buyers and sellers information to be able to make more decisions, but it's not information, but all the buyers are institutions, sophisticated individual
investors. so we believe they're making informed decisions. >> a lot of people talking about these valuations. and there is a fair amount of talk that we're creating another bubble in terms of the internet companies. what do you think? >> as a marketplace, it's hard to make an assessment as to when things are over or undervalued. there is a lot of talk about the facebook valuation. at 56 now, but linkedin which traded on secondmarket before going public last traded at 35 on secondmarket. today it went public. it's at $100. so i'm not really sure whether or not things are over or undervalued. we're just happy to kind of create a fluid marketplace. >> and of course there is so much volume. and people are noticing that they can actually have an investment and trade in these. you mentioned linkedin. it went public in may. a great success. facebook could go public next year. as these big social media companies issue their ipos, what is in it for you? what happens to the private marketplace then? >> we think it's great. as the companies are going public, what is happening is
more investors are getting involved before they go public, which is great for the private companies. and more investors are making money before the companies go public, and that money is recycling back into the system. you have to remember these small cap companies, they are the job creators. they're the ones that are going to i think be innovative that are going to help bring us out of this recession. having the capital come back into the market, it's great. >> that's a great point, actually. you're right. you developed a number of social networking compliments to the way trades occur on secondmarket. what do you see happening for traditional exchanges? >> well, first, the new york stock exchange right behind us. iconic brand, excellent management. but i think the public markets have gotten so far away from what they used to. it's now all about high frequency trading. it's casino trading. 60% of the trading is being done by computer algorithms. so we think the second market is kind of here to stay, and it's going to be a compliment to the public market or maybe over time an alternative. >> yeah, you're right about the algorithms. that's creating so much
volatility. people are wondering if perhaps there is too much complexity. >> it seems really scary, but you look at the average time someone holds a public share stock. in 1970 it was five years. today 2.8 months. so it means if you're a public company ceo, you're now being judged on quarterly earnings, not on your long-term mission. >> that's a great point. barry, good to have you on the program. we'll be watching secondmarket for sure. great story there. up next on "the wall street journal report," making an irish company your own. 40% off and travel deals online
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u.s.a.a. we know what it means to serve. street. it is the height of summer vacation. some intrepid travelers are reaping the benefits of benefit. jetsetter.com is offering luxury vacations on sale. drew patterson is the founder and ceo of jetsetter.com. he joins me right now. drew, good to have you on the program. >> thanks for having me today. >> thank you so much for joining u. jet-setter offers flash sales on luxury destinations. 30 to 50% off. pretty good stuff there. how is this different from other online offerings in the travel industry? >> first we have flash sales. so again, we have savings of up to 33% some of the best places in the world. we can do this because we have an invitation only community and
we have a limited amount of inventory and sales only last for a couple days. all those reasons let us get savings that other sites can't get. second, we have a network of correspondents, about 200 people, travel writers, experts all around the world who are cure rating great places for our members to go. making sure our members have great experiences and verifying. >> so who is juiusing jetsetter? >> young affluent professionals. they tend to live in major metropolitan areas. they're college-educated. an interesting thing to do, they look for better places to go on their vacations. >> so most of the country today, this weekend experiencing a major heatwave. we both feel it right now. what are the escapes that you're talking about right now in the middle of all this heat? >> it's a tough week, isn't it? a couple of things that we've got that i think might be of interest. first, there is a hotel in sweden we're featuring, a tree hotel, a tree housed a kid growing up. i was really excited we were able to launch this.
it's five tree houses in a natural reserve in the north of sweden. >> okay. what else? >> let's see. there is a hotel in italy. you mentioned you're going to be in italy. >> yeah. >> this weekend. >> near lake como. we have a great property there. if you have a chance, check it out. >> lake como is gorgeous. how are consumers thinking about their vacation dollars these days? we know that we're in a soft patch in terms of the economy. what is your customer response tell you about that part of the economy? >> sure. we see two things. one is clearly folks want value. and a site like jet-setter is a great way for this to find value. the second thing is they're looking for unique experiences. they're looking for something different that they can share with friends or coworkers when they come back. i think that's something that jetsetter really does well. with the network of 200 correspondents, we're able to find unique experiences and give them a story about what it's going to be like before they go. >> and your company is part of gil's group, a flash sale
ecommerce site that has raised more than a billion dollars in private funding, one of secondmarket's rising stars. what is your reaction to the buzz about flash sale sites now? what is the impact of a initial public offering? >> i think it's a real validation for the category. i think the excitement you see around flash sales in general given the kind of savings we're able to provide and the approach toward finding great places, it's something that resonates with consumers. >> and i guess you've got some competition out there. what is the competition like for you? other daily deal sites, living social. groupon. >> competition is only heating up. we're excited about it. i think what we found is those kind of mass market sites really don't speak as jetsetter. jetsetter is focused on a upwardly mobile affluent sophisticated traveler. unlike the mass market deal sites, we're able to put together a different kind of experience. >> hence the name. so where are you traveling next? did you get a good deal?
tell me what you're doing. >> i just got back from iceland, which was fantastic. one of the things that made the trip great is we just launched a new service where we're letting our members get in touch with the experts. when you're thinking about a vacation, one of our experts will put together an itinerary, come up with a set of things to do, local attractions, and it's fantastic. i went atving to the top of the volcano that shut down europe. >> how are you able to offer such great deals? >> i think it come downs to the fact we're a great marketing service for our partner. because we have the short sales that generate a lot of interest, they're willing to give us savings because they know we have the right kind of customer. and that customer gets to try that property and it serves a means for them to reach the market. it's really hard for individual hotels to reach interested sophisticated travelers. and we provide a vehicle for that. >> where do people want to go these days? what are some of the hot spots you're hearing about? >> i think folks are looking for things a little different. some of the things we've had the most success with this summer, one, great results in hawaii.
the hyatt in maui was hugely successful. we also had a lot of folks looking for the standard hotel here in new york city. >> we'll leave there it. thank you so much. >> thank you. >> drew patterson joining us with the deals on travel. up next on "the wall street journal report," a look at the news this come coming week that will have an impact on your money. and a look at how the first stock market got its start. textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing.
for more on our show and our guests, check out the website, wsjr.cnbc.com. and i hope you will follow me on twitter. find me at @maria bartiromo.com. now a look at the markets that may impact your money this week. we will hear from bp, ford motor, chevron, merck, boeing, exxonmobil and amazon.com, among other companies. tuesday the s&p case-shiller home index will be out, giving us a window into housing, as is the report on the number of new homes sold last month. wednesday the federal reserve will release the monthly beige book, a survey of the country's regional economies. and friday the gross domestic product for 2011 second quarter. the gdp is the broadest measure of the health of the economy in the u.s., and typically a market-mover. finally today, and fitting in this july heat, did you know the building behind me was one of the first in the world to have an air conditioner. the current structure of the new york stock exchange opened at
the intersection of wall and broad in 1903 with an ac. but the neighborhood business really began more than 100 years earlier. the buttonwood tree ein front of the stock exchange commemorates the 1792 buttonwood agreement passed by prominent new yorkers under a tree at the modern corner of wall and water streets. back then, five securities were traded on wall street. three government bonds, and two bank stocks. great history there. that will do it for us today. thank you so much for joining us. next week, the big business of beer. each week keep it right here where wall street meets main street. have a great week, everybody. stay cool, and i'll see you next weekend. ♪
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